Economic impact

April 07, 2014

Wall Street Journal energy reporter Russell Gold has penned an eminently readable, informative account of today's shale boom. The Boom: How Fracking Ignited the American Energy Revolution and Changed the World goes on sale Tuesday and is worth a look from anyone interested in learning more about how shale oil and gas development has taken place. To read the Star-Telegram's review and interview with Gold, click here.

January 16, 2014

Shale production will keep natural gas prices in North America in the range of $4-$5 per 1,000 cubic feet in 2012 dollars through 2035, says a new report by energy researcher IHS. It predicts that even at $4 or less, about 900 trillion cubic feet of unconventional gas resources can be produced economically. That's more than 30 years of U.S. consumption at current levels and only about a third of total recoverable resources. "This means that the North American natural gas resource base can accommodate significant increases in demand without requiring a significantly higher price to elicit new supply," Tim Gardner, IHS vice president, said in a news release accompanying the study. There has been considerable debate over whether plans to export natural gas from North America would run up domestic prices from their low levels in recent years, which are a boon to petrochemical companies and other manufacturers, as well as consumers. The study said that over 15 years, an average residence that uses natural gas for heat will save $5,731 compared to an all-electric home. A copy of the study, titled Fueling the Future with Natural Gas: Bringing it Home, is available here.

December 12, 2013

Irving-based Exxon Mobil in its annual energy outlook said it expects world energy demand to rise 35 percent by 2040 as growth from developing economies overwhelms declines in more developed economies. Here's the Associated Press story:

NEW YORK -- Exxon Mobil says the drive for higher living standards around the world will keep demand for electricity and transportation fuels growing even as economies get more efficient and governments put a price on pollution.

The company’s annual long-term energy outlook, released Thursday, predicts world energy demand will grow 35 percent by 2040 as electricity and modern fuels are brought to some of the billions of people in the developing world who currently live without power or burn wood or other biomass for cooking and heating. Those growing needs will be somewhat offset by a slow decline in consumption in the far more energy-hungry economies of the developed world.

“People want a warm home, a refrigerator, a TV, someday a car, and a cellphone,” said William Colton, Exxon’s vice president for corporate strategic planning, in an interview.

There are ample supplies of fuel to meet the world’s demands, according to the report, and Colton concludes that average annual growth of 1 percent per year is manageable for the world’s energy companies.

Exxon’s outlook, which forecasts world energy demand through 2040, is noted by investors and policymakers, and used by Exxon to shape its investments. “The last thing we want to do is delude ourselves about the future,” Colton said. “We make billion-dollar decisions on this.”

The report’s conclusions largely agree with those reached in other long-term energy forecasts, including a recent report by the International Energy Agency.

The outlook predicts demand for oil and natural gas – Exxon’s main products – will grow steadily because shippers and truckers will need more diesel to move more goods and utilities will need additional natural gas to make electricity for more people.

Use of coal, now the chief fuel for electricity and the second most important fuel in the world after oil, will flatten in the next decades and slip to third place as countries shift to cleaner natural gas. Nuclear power and renewable electricity sources such as wind, solar and biofuels will grow fastest of all, but remain a small part of the energy mix by 2040 because they will remain expensive.

Exxon expects governments to impose costs on fossil fuel consumption and subsidize renewable energy in an effort to reduce emissions of gases that scientists say are causing climate change. Exxon expects those costs to be roughly $80 per ton of carbon dioxide– a price that may be explicit in the form of a carbon tax or baked in to the cost of new technology and equipment needed to meet stricter emissions limits. --

“In one way or another governments will put in place policy that will increase the cost of hydrocarbons, whether it’s on supply or consumption,” said Ken Cohen, Exxon’s vice president of public and government affairs.

That, along with the drive to reduce costs, will lead to dramatic gains in energy efficiency. Minimum fuel economy requirements in the U.S. and elsewhere are making cars much less thirsty, and stronger building codes and appliance standards will help make homes and businesses more efficient. The slow switch from coal to natural gas, which emits about half the carbon dioxide as coal, will also help slow the growth of climate-changing gases.

Energy-related carbon dioxide emissions are expected to continue to grow through 2030, before leveling off and beginning a slow decline.

Traditional fossil fuels will remain abundant, thanks to improvements in drilling technology. Drillers have learned to extract oil and gas from formations deep offshore and in shale and other rocks that were once impossible to tap. The amount of oil that can be extracted with today’s technology is growing, even though the world burns 90 million barrels of it every day.

By 2040, Exxon says, 65 percent of the world’s recoverable crude oil will still be in the ground.

A problem for drillers, though, is that the new oil that is being unlocked is more and more expensive to produce. That puts enormous strain on the global energy industry as it works to develop new fields to meet rising demand as current fields decline.

Despite the boom in oil production in North America, the Middle East will remain the center of world oil production. Exxon predicts the nations of OPEC will produce 45 percent of the world’s oil by 2040 – up from about one-third now.

September 04, 2013

IHS, a big energy consultant, says in a new report that the impact of oil and natural gas production from shale helped U.S. households gain an average $1,200 in disposable income from lower energy costs and lower prices on other goods and services. It projected that by 2020 those savings would rise to more than $2,700, and said the impact from shale production will continue to help the nation's trade deficit by cutting energy imports. Employment tied to unconventional oil and gas production now stands at 2.1 million jobs nationally, and will rise to more than 3.3 million in 2020, mostly in production-related activities. Additionally, another 460,000 manufacturing jobs will be supported by 2020, the study says.

"The unconventional oil and gas revolution is not only an energy story, it is also a very big economic story that flows throughout the U.S. economy in a way that is only now becoming apparent," IHS Vice Chairman Daniel Yergin said in a prepared release. Yergin is the author of two respected histories of the global energy industry. The study estimates that the industry added $284 billion to the nation's gross domestic product (GDP) in 2012, and figure it expects to rise to nearly $533 by 2025. A link to the full report is here.

December 26, 2012

Fort Worth resident Deborah Rogers, who has been critical of natural gas drilling and the economics of shale gas production, has been named to a 21-member advisory committee to the Department of Interior. The group will "guide and oversee implementation of the United States Extractive Industries Transparency Initiative," which DOI describes on its website as "a voluntary, global effort designed to increase transparency, strengthen the accountability of natural resource revenue reporting and build public trust for the governance of these activities." DOI said President Barack Obama committed the U.S. to the international effort in 2011. Advisory committee members include representatives from environmental organizations, academia and industry.

Rogers, in a prepared release, called the committee's work "a tremendous opportunity to address financial issues with respect to natural resource extraction in this country." She was a 2008-2011 member of an advisory council to the Dallas Federal Reserve Bank, serves on the committee that advised the Texas Commission on Environmental Quality as it located air monitors in the Barnett Shale, and is a board member of Earthworks' Oil and Gas Accountability Project, according to the release. The release said she will appear in the upcoming documentary "Gasland 2"

In 2011 she founded Energy Policy Forum, "a consultancy and educational forum dedicated to policy and financial issues regarding shale gas and renewable energy." In an October blog post on her site, Rogers argued that shale gas is a money-loser driven by Wall Street. "There is no doubt that the investment banking community has been the driving force behind shale production since the economic downturn. Shale should have unravelled long before now. But Wall Street saw an opportunity to generate massive fees and so shale was taken to new heights... ." In 2009 she paid for air quality tests at her Westworth Village farm that showed elevated levels of several chemical compounds associated with natural gas production and flaring. The same year, which saw a sharp decline in the price of natural gas as supply surged, she concluded that shale gas wells "are depleting so quickly that the operators are in an expensive game of 'catch-up,' " according to an e-mail quoted in a New York Times report.

May 24, 2012

The Federal Reserve Bank of Dallas takes a look at South Texas' Eagle Ford Shale in its latest issue of Southwest Economy. Economists at the Fed say the 23-county area has added more than 15,000 jobs since Jan. 1, 2010, and also has seen wages rise. The study is here.

May 09, 2012

Oil and gas development in South Texas' Eagle Ford Shale added more than $25 billion in economic impact to the region, according to a new study by the University of Texas at San Antonio. The school's Center for Community and Business Research said the oil-rich formation supported 47,000 full-time jobs and provided $257 million to local governments. Also in the numbers were $3.1 billion in salaries and benefits and $358 million to state government. It predicts the field will be responsible for 117,000 full-time jobs by 2021. To see the study, click here. (This will open a dialog box to download a PDF file.)

March 26, 2012

Texas electricity producers' move away from natural gas as a fuel is costing the state billions, a new study says. University of Houston professor Michael Economides and consultant Philip Lewis maintain that even as the nation is using more natural gas for power, Texas generators' use of wind is rising much faster than the U.S. trend and their use of coal is declining more slowly than the U.S. The study's authors calculate that the differences from 2005 through 2011 translated into a $7.7 billion economic loss to the state.

April 01, 2008

The company is paying for newspaper ads and it purchased six hours of television time to air a 30- minute "newsmagazine" it's calling "Citizens of the Shale." The ads refer to the research of economist Ray Perryman, who is quoted saying "the payoff is there for everyone, and people are all seeing the benefit."

"Citizens of North Texas are talking about the Barnett Shale and its vast supply of natural gas," the advertisements say. "Some people are skeptics, some are opposed to any development. Many have concerns but simply need to learn more."

"Catch all sides of the Barnett Shale debate," Chesapeake says in its ads. Here's the schedule for the show:

February 13, 2008

Standard & Poor's, the credit rating agency, is out with an interesting report. At the 30,000-foot level, S&P is interested in how Barnett Shale revenues will affect municipalities' ability to repay debts. In its report, at www.standardandpoors.com, S&P reviews a number of everyman (and everywoman) questions about the impact of the Shale. Among them:

What's the significance of the Barnett Shale's gas reserves?

What's the economic impact of the Shale?

Have these windfalls led to any credit rating changes for municipal debt?

How are these municipalities using their windfalls?

What's the effect on residential property values?

What does the future of the Shale hold for the quality of debt issued by area municipalities?